Correlation Between First Trust and Pacer Pacific
Can any of the company-specific risk be diversified away by investing in both First Trust and Pacer Pacific at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Trust and Pacer Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and Pacer Pacific Asset, you can compare the effects of market volatilities on First Trust and Pacer Pacific and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Trust with a short position of Pacer Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pacer Pacific.
Diversification Opportunities for First Trust and Pacer Pacific
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Pacer is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Pacer Pacific Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Pacific Asset and First Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Trust Senior are associated (or correlated) with Pacer Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Pacific Asset has no effect on the direction of First Trust i.e., First Trust and Pacer Pacific go up and down completely randomly.
Pair Corralation between First Trust and Pacer Pacific
Given the investment horizon of 90 days First Trust is expected to generate 1.83 times less return on investment than Pacer Pacific. But when comparing it to its historical volatility, First Trust Senior is 1.39 times less risky than Pacer Pacific. It trades about 0.19 of its potential returns per unit of risk. Pacer Pacific Asset is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,754 in Pacer Pacific Asset on November 18, 2024 and sell it today you would earn a total of 17.00 from holding Pacer Pacific Asset or generate 0.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Senior vs. Pacer Pacific Asset
Performance |
| Timeline |
| First Trust Senior |
| Pacer Pacific Asset |
First Trust and Pacer Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Pacer Pacific
The main advantage of trading using opposite First Trust and Pacer Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Pacer Pacific can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pacer Pacific will offset losses from the drop in Pacer Pacific's long position.| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
| Pacer Pacific vs. Franklin Liberty Senior | Pacer Pacific vs. Franklin Liberty Short | Pacer Pacific vs. SPDR Bloomberg Investment | Pacer Pacific vs. VanEck Investment Grade |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Managers module to screen money managers from public funds and ETFs managed around the world.
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